American families are feeling the pinch of rising electricity prices. In the past five years alone, the generation portion of the standard service residential electric bill in Columbus, Ohio, has increased by 110%. This is one data point in a national trend.
Energy affordability is quickly shaping up to be a key election issue at all levels of American politics. And more than half of U.S. Adults surveyed in January 2026 reported being very concerned about the price of electricity.
Experts in the energy industry are fiercely conflicted on what, or who, is to blame. Some point to geopolitical events like the war in Ukraine, changes in U.S. Energy policies, power grid operators, regulators and artificial intelligence and data centers. But new research suggests another factor is at play: middlemen introduced by electricity deregulation.
Between the late 1990s and early 2000s, several state legislatures deregulated their electricity systems. The promise was lower prices through competition, replacing what was described as inefficient regulation and bureaucracy. Under the old system, state regulatory commissions set prices for all electricity services – generation, transmission, and distribution – supplied by a single monopoly utility. These commissions were legally required to ensure rates were “just and reasonable.”
Deregulation split off the generation portion, creating competitive wholesale markets. However, price competition didn’t widely extend to the retail level. Instead, it created a new layer of complexity: middlemen marketers. In states with retail deregulation, consumers have two options: buy from a marketer on the open market, or remain with the default service.
The Open Market: A Complex Choice
Consumers in deregulated markets can choose a company to buy electricity on their behalf. This often involves encountering energy salespeople at homes, stores, or through telemarketing. For example, residents of the Cincinnati area can contract with over 50 suppliers to purchase electricity from the wholesale market. Their monthly bill still comes from the regulated distribution utility, like Duke Energy, and includes regulated charges for transmission and distribution. But it also includes charges from an unregulated retail supplier for the generation portion of the bill.
Some locations also have community choice aggregation, where a municipality participates in the open market on behalf of its residents, unless individuals opt out.
Research from The Ohio State University’s Energy Markets and Policy Group found that 72.1% of open-market offers exceeded the utility’s default rate. In some years, no cost-saving offers were available for the entire year. The study suggests that the time spent researching and comparing prices often isn’t worth it for consumers.
Crucially, the research indicates that suppliers in the open market aren’t basing their prices on underlying wholesale electricity costs. Instead, they appear to be reacting to the results of the utility’s default supply selection – a dynamic not envisioned in the original concept of deregulation.
Default Service: Not Always Competitive
Consumers who don’t actively shop on the open market remain on “standard offer” or “default service,” sometimes called “provider of last resort” service. State law typically requires distribution utilities to hold auctions or use a procurement process to determine which companies will be their supplier, and at what price.
Even in this scenario, consumers are still buying from middleman marketers, but the utility selects the company for them. A separate study by the same research group evaluated every default service auction in Ohio since 2011. It found that the number of companies competing significantly impacts retail markups. Auctions with fewer bidders resulted in higher prices for consumers. Specifically, having just three additional bidders could reduce default rates by 18% to 23%, while nine additional bidders could deliver savings of up to 60%.
Ohio’s process for setting default service rates is considered more robust than in many other states, suggesting the issue may be even more pronounced elsewhere.
A System Falling Short of its Promise
The research team’s findings paint a concerning picture. The open market isn’t delivering efficient retail rates, and most offers aren’t worth consumers’ time. Suppliers are reacting to default supply auctions rather than market fundamentals. And the default supply process itself isn’t always competitive, allowing middlemen to inflate prices.
Energy deregulation promised lower prices through competition. Instead, consumers have encountered a complex system dominated by middlemen, often taking their cues from a bidding process lacking sufficient competition. The result, according to this research, is that consumers are often paying more for their electricity than they should be.
